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Russia Adds Pressure To The EU In ETS Battle

European airlines could find themselves in middle of an increasingly rancorous political dispute after representatives of 23 countries meeting in Moscow yesterday agreed on a range of measures intended to pressure the European Union to delay or reverse the inclusion of aviation in its emissions trading system (ETS). The ETS was extended to include aviation on Jan. 1.

The Moscow declaration, a copy of which was obtained by Aviation Week ahead of its official publication on Friday, outlines a number of possible retaliatory options, such as reviewing bilateral air service agreements, including open skies with individual EU members; suspending current and future discussions to enhance operating rights for EU airlines and aircraft operators; imposing additional charges on EU airlines; and filing an application under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO rules.

“Every state will choose the most effective and reliable measures which will help to cancel or postpone the implementation of the EU ETS,” Russian Deputy Transport Minister Valery Okulov said in a briefing immediately after the meetings, adding that Russia intends to “get the EU’s carbon trading measures either canceled or postponed.”

Russia, like China, is preparing legislation that forbids its airlines to participate in the ETS. The country also will look at limiting Siberian overflights for European airlines in an effort to step up the pressure. (Russia was forced to ease its limits on Siberian overflights as part of its World Trade Organization accession process). If the EU continues to enforce the new rules, Russia could block its civil aviation radio frequencies from use by EU carriers flying to and from the Far East, effectively closing Siberia‘s airspace to them, Okulov said.

One industry observer notes that in spite of the strong language, the countries involved are not as united as they may appear. There is a hard-line faction that includes Russia and India that is pushing for immediate retaliation. But some countries, like the United Arab Emirates, did not even participate with their own delegation in the Moscow event. Those countries argue that pressure should continue to be put on the European Commission (EC), while aiming for a solution in an ICAO process.

In response to the Moscow meeting, an EC official says the EC has not received a full account of the outcome and possible countermeasures, but he challenged the participants to propose a credible alternative. “What are your concrete and constructive alternatives for a global meeting at ICAO?”

The EU would defend its legislation during an ICAO battle. “We are completely sure ... that our legislation does not bridge any principle of international law, including ICAO principles.” And, he adds, “we are confident the ICAO dispute procedure will side with us.”

“The situation is totally unacceptable,” says Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines. “Airlines must not be taken hostage by politicians or be forced to compete with serious market distortions.” In Schulte-Strathaus’ view “it is not right to attempt to force the EU to change their law. Nor is it right to impose European standards on the rest of the world.”

Schulte-Strathaus believes that “ICAO is, without a doubt, the way forward. Countries must move away from retaliation and counter-retaliation and instead come up with concrete, short-term action towards a resolution.”

The Moscow meeting was the second of countries opposed to ETS. The first was held in Delhi in the fall, and a third is planned in Saudi Arabia in the summer. The group of countries includes the U.S., the UAE, Saudi Arabia, Brazil, India, China and Russia.

India previously has said that it is considering opening bilateral air service agreement negotiations with European countries with the aim of limiting EU carriers’ access to India.

The EU ETS was extended to aviation on Jan. 1, but airlines are not due to submit carbon certificates to cover their emissions until early 2013. If airlines cannot cover provide allowances to cover their CO2 emissions, they face financial penalties.

Countries opposing the ETS and industry associations, such as the International Air Transport Association, have been calling for a global approach to dealing with aviation’s CO2 production through ICAO, rather than what they see as a unilateral approach. But the EC has not given any indication it is willing to change its mind. Climate Commissioner Connie Hedegaard stated the EU was willing to accept so-called “equivalent measures” in which third countries prove their environmental engagement. She also said that “nobody is happier than the European Union if we could have such a [global] regime.”

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